How the politics of the day affects our markets

Anti-Zuma protesters march ahead of the vote of no confidence against President Jacob Zuma in Cape Town

CAPE TOWN - Domestic and global geopolitical factors mostly contributed towards the selling of risky assets (shares) across the globe.

The worrying conflict between the US and North Korea on a possible long range missile attack and Gaum, a US territory housing a strategic air and naval base, has led to investors seeking more defensive assets, like gold and bonds.

On Wall Street, the Dow Jones industrial index traded 1% lower for the week in early trade on Friday.

In Europe, the German Dax ended the week 2.3% lower, while the FTSE100 in London lost 2.7% on the previous Friday’s close.

Locally, although the unsuccessful motion of no-confidence in President Zuma almost had no effect on the financial numbers, market jitters around Moody’s possible downgrading of of South Africa’s sovereign debt late on Friday, contributed to a sell-off of shares on the JSE.

On the economic front, the release of negative manufacturing (- 2.3%) and mining production (- 0.8%) data for June, also weighed heavily on negative sentiment on the JSE.

The all share index lost 789 points (1.4%) for the week, after the index closed on a record level of 56396 last Monday. However, the index is still 6.9% higher since the end of June and 8.9% up since the beginning of the year.

Over the week, the industrial index decreased 1.7%, but remained 11.1% higher for the year to date. Financials tracked the weaker rand and traded down by 1.1% since the previous Friday’s level.

Resources also took a dip last week and closed 1.2% lower on Friday. The listed property index also moved south and ended the week 1.1% down.

The rand stayed under pressure given the domestic geo-political and the Moody’s issue of a possible further downgrading.

On Friday afternoon just after the close of the JSE, the rand traded at R13.47 to the dollar. This was almost the same level as the previous week.

Against the pound, the rand traded somewhat stronger over the week, gaining 5cents, or 0.3%.

Against the euro, the rand lost a further 11c, or 0.7% and traded late on Friday afternoon on R15.91.